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Microeconomics 17th Edition Test Bank

Microeconomics 17th Edition Test Bank is an essential resource to help you tackle your upcoming exams with confidence. This guide includes key questions and answers to boost your exam preparation.

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    Chapter 1 Testbank Student: ___________________________________________________________________________ 1. For economists, the word "utility" means: A. versatility and flexibility. B. rationality. C. pleasure and satisfaction. D. purposefulness. 2. In economics, the pleasure, happiness, or satisfaction received from a product is called: A. marginal cost. B. rational outcome. C. status fulfillment. D. utility. 3. When economists say that people act rationally in their self interest, they mean that individuals: A. look for and pursue opportunities to increase their utility. B. generally disregard the interests of others. C. are mainly creatures of habit. D. are unpredictable. 4. According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because: A. people are greedy. B. productive resources are limited. C. human beings are inherently insecure. D. people are irrational. 5. According to economists, economic self - interest: A. is a reality that underlies economic behavior. B. has the same meaning as selfishness. C. is more characteristic of men than of women. D. is usually self - defeating.

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    6. When entering a building, Sam diverts his path to go through an open door rather than make the physical effort to open the closed door that is directly in his path. This is an example of: A. irrational behavior. B. a lazy person. C. marginal benefit - marginal cost analysis. D. programmed learning. 7. Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of: A. opportunity costs. B. marginal benefits that exceed marginal costs. C. imperfect information. D. normative economics. 8. A person should consume more of something when its marginal: A. benefit exceeds its marginal cost. B. cost exceeds its marginal benefit. C. cost equals its marginal benefit. D. benefit is still positive. 9. Economics may best be defined as the: A. interaction between macro and micro considerations. B. social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity. C. empirical testing of value judgments through the use of logic. D. use of policy to refute facts and hypotheses. 10. The study of economics is primarily concerned with: A. keeping private businesses from losing money. B. demonstrating that capitalistic economies are superior to socialistic economies. C. choices that are made in seeking the best use of resources. D. determining the most equitable distribution of society's output.

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    11. The economic perspective refers to: A. macroeconomic phenomena, but not microeconomic phenomena. B. microeconomic phenomena, but not macroeconomic phenomena. C. the making of purposeful decisions in a context of marginal costs and marginal benefits. D. unlimited resources in a context of limited economic wants. 12. The economic perspective entails: A. irrational behavior by individuals and institutions. B. a comparison of marginal benefits and marginal costs in decision making. C. short - term but not long - term thinking. D. rejection of the scientific method. 13. Purposeful behavior suggests that: A. everyone will make identical choices. B. resource availability exceeds economic wants. C. individuals will make different choices because of different desired outcomes. D. an individual's economic goals cannot involve tradeoffs. 14. Purposeful behavior means that: A. people are selfish in their decision - making. B. people weigh costs and benefits to make decisions. C. people are immune from emotions affecting their decisions. D. decision - makers do not make mistakes when weighing costs and benefits. 15. Economics involves marginal analysis because: A. most decisions involve changes from the present situation. B. marginal benefits always exceed marginal costs. C. marginal costs always exceed marginal benefits. D. much economic behavior is irrational. 16. You should decide to go to a movie: A. if the marginal cost of the movie exceeds its marginal benefit. B. if the marginal benefit of the movie exceeds its marginal cost. C. if your income will allow you to buy a ticket. D. because movies are enjoyable.

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    17. Marginal costs exist because: A. the decision to engage in one activity means forgoing some other activity. B. wants are scarce relative to resources. C. households and businesses make rational decisions. D. most decisions do not involve sacrifices or tradeoffs. 18. The assertion that "There is no free lunch" means that: A. there are always tradeoffs between economic goals. B. all production involves the use of scarce resources and thus the sacrifice of alternative goods. C. marginal analysis is not used in economic reasoning. D. choices need not be made if behavior is rational. 19. Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of: A. resource scarcity and the necessity of choice. B. purposeful behavior. C. marginal costs that exceed marginal benefits. D. the tradeoff problem that exists between competing goals. 20. If someone produced too much of a good, this would suggest that: A. rational choice cannot be applied to many economic decisions. B. the good was produced to the point where its marginal cost exceeded its marginal benefit. C. certain goods and services such as education and health care are inherently desirable and should be produced regardless of costs and benefits. D. the good was produced to the point where its marginal benefit exceeded its marginal cost. 21. Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact: A. is an example of irrational behavior. B. implies that reading should be taught through phonics rather than the whole language method. C. contradicts the economic perspective. D. implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

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    22. In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of: A. scarcity and opportunity costs. B. money and real capital. C. complementary economic goals. D. full production. 23. Which one of the following expressions best states the idea of opportunity cost? A. "A penny saved is a penny earned." B. "He who hesitates is lost." C. "There is no such thing as a free lunch." D. "All that glitters is not gold." 24. Which of the following is an economic explanation for why most college - aged movie stars do not attend college. A. they are too dumb to get into college B. they would find college life boring C. the opportunity cost in terms of reduced income is too great D. they cannot afford the room, board, and tuition fees most colleges charge 25. Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates: A. distorted priorities. B. opportunity costs. C. increasing opportunity costs. D. productive efficiency. 26. Which of the following most closely relates to the idea of opportunity costs? A. tradeoffs. B. economic growth. C. technological change. D. capitalism.

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    27. An economic hypothesis: A. has the same meaning as an economic principal or economic law. B. is usually a normative statement. C. is a possible explanation of cause and effect. D. is a stronger generalization than an economic law. 28. Which of the following terms implies the least degree of confidence in an economic generalization? A. a hypothesis. B. a theory. C. a principle. D. a law. 29. Which of the following terms implies the greatest degree of confidence in an economic generalization? A. a hypothesis. B. a theory. C. a principle. D. an anomaly. 30. A well - tested economic theory is often called: A. a hypothesis. B. a prototype. C. a principle. D. an anomaly. 31. Economists: A. use both the economic perspective and the scientific method. B. use the economic perspective but not the scientific method. C. make positive economic statements, but not normative economic statements. D. reject theorizing as being impractical.

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    32. The scientific method is: A. not applicable to economics, because economics deals with human beings. B. also known as the economic perspective. C. analysis that moves from broad generalizations called laws to theories and then to hypotheses. D. used by economists and other social scientists, as well as by physical scientists and life scientists. 33. The process by which economists test hypotheses against facts to develop theories, principles, and models is called: A. the economic perspective. B. the scientific method. C. policy economics. D. microeconomics. 34. Economic theories: A. are useless because they are not based on laboratory experimentation. B. that are true for individual economic units are never true for the economy as a whole. C. are generalizations based on a careful observation of facts. D. are abstractions and therefore of no application to real situations. 35. Theoretical economics: A. is also known as policy economics. B. is the process of deriving principles of economics. C. is highly impractical since it does not deal with the real world. D. rejects the scientific method as being inappropriate for the social sciences. 36. Which of the following is a correct statement? A. Economic concepts or laws that are valid during depression are necessarily valid during prosperity. B. Though not quantitatively exact, economic laws are useful because they allow us to predict and therefore control or adjust to events. C. Economics is as scientific as are physics and chemistry because economic laws are as quantitatively precise as the laws of physics or chemistry. D. Because economics is concerned with questions of "ought," it is a branch of applied ethics and not scientific.

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    37. In constructing models, economists: A. make simplifying assumptions. B. include all available information. C. must use mathematical equations. D. attempt to duplicate the real world. 38. Economic models: A. are of limited use because they cannot be tested empirically. B. are limited to variables that are directly related to one another. C. emphasize basic economic relationships by purposefully simplifying the complexities of the real world. D. are unrealistic and therefore of no practical consequence. 39. The term "ceteris paribus" means: A. that if event A precedes event B, A has caused B. B. that economics deals with facts, not values. C. other things equal. D. prosperity inevitably follows recession. 40. The basic purpose of the other - things - equal assumption is to: A. allow one to reason about the relationship between variables X and Y without the intrusion of variable Z . B. allow one to focus upon micro variables by ignoring macro variables. C. allow one to focus upon macro variables by ignoring micro variables. D. determine whether X causes Y or vice versa. 41. Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that: A. the quantity of bananas purchased determines the price of bananas. B. all factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant. C. economists can conduct controlled laboratory experiments. D. one cannot generalize about the relationship between the price of bananas and the quantity purchased.

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    42. An hypothesis is: A. a fundamental truth that all economists accept. B. a tentative, untested statement of possible cause and effect. C. the same as a normative statement. D. also known as a principle or law. 43. The term "other things equal" means that: A. the associated statement is normative. B. many variables affect the variable under consideration. C. a number of relevant variables are assumed to be constant. D. when variable X increases so does related variable Y . 44. Macroeconomics approaches the study of economics from the viewpoint of: A. the entire economy. B. governmental units. C. the operation of specific product and resource markets. D. individual firms. 45. Which of the following is associated with macroeconomics? A. an examination of the incomes of Harvard Business School graduates B. an empirical investigation of the general price level and unemployment rates since 1990 C. a study of the trend of pecan prices since the Second World War D. a case study of pricing and production in the textbook industry 46. The problems of aggregate inflation and unemployment are: A. major topics of macroeconomics. B. not relevant to the U.S. economy. C. major topics of microeconomics. D. peculiar to command economies.

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    47. Which of the following statements pertains to macroeconomics? A. Because the minimum wage was raised, Mrs. Olsen decided to enter the labor force. B. A decline in the price of soybeans caused farmer Wanek to plant more land in wheat. C. National income grew by 2.7 percent last year. D. The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point. 48. Macroeconomics can best be described as the: A. analysis of how a consumer tries to spend income. B. study of the large aggregates of the economy or the economy as a whole. C. analysis of how firms attempt to maximize their profits. D. study of how supply and demand determine prices in individual markets. 49. Microeconomics is concerned with: A. the aggregate or total levels of income, employment, and output. B. a detailed examination of specific economic units that make up the economic system. C. positive economics, but not normative economics. D. the establishing of an overall view of the operation of the economic system. 50. Microeconomics: A. is the basis for the "after this, therefore because of this" fallacy. B. is not concerned with details, but only with the overall big picture of the economy. C. is concerned with individual economic units and specific markets. D. describes the aggregate flows of output and income. 51. Which of the following is a macroeconomic statement? A. The gross profits of all U.S. businesses were $182 billion last year. B. The price of beef declined by 3 percent last year. C. General Motors' profits increased last year. D. The productivity of steelworkers increased by 1 percent last year.

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    52. Which of the following is a microeconomic statement? A. The real domestic output increased by 2.5 percent last year. B. Unemployment was 6.8 percent of the labor force last year. C. The price of personal computers declined last year. D. The general price level increased by 4 percent last year. 53. A normative statement is one that: A. is based on the law of averages. B. applies only to microeconomics. C. applies only to macroeconomics. D. is based on value judgments. 54. Which of the following is a normative statement? A. The temperature is high today. B. The humidity is high today. C. It is too hot to play tennis today. D. It will cool off later this evening. 55. A positive statement is one which is: A. derived by induction. B. derived by deduction. C. subjective and is based on a value judgment. D. objective and is based on facts. 56. Which of the following is a positive statement? A. The humidity is too high today. B. It is too hot to jog today. C. The temperature is 92 degrees today. D. Summer evenings are nice when it cools off. 57. Normative statements are concerned with: A. facts and theories. B. what ought to be. C. what is. D. rational choice involving costs and benefits.

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    58. A positive statement is concerned with: A. some goal that is desirable to society. B. what should be. C. what is. D. the formulation of economic policy. 59. Ideally, value judgments are involved at the: A. levels of facts, theory, and policy. B. levels of facts and theory only. C. level of facts only. D. level of policy only. 60. Most of the disagreement among economists involves: A. facts. B. principles. C. positive statements. D. normative statements. 61. "Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is: A. positive, but incorrect. B. positive and correct. C. normative, but incorrect. D. normative and correct. 62. Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that: A. Ben's statement is normative, but Holly's is positive. B. Holly's statement is normative, but Ben's is positive. C. Both statements are normative. D. Both statements are positive.

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    63. The economizing problem is: A. the need to make choices because economic wants exceed economic means. B. how to distribute resources equally amongst all members of society. C. that people's means often exceed their wants. D. that people do not know how to rationally allocate resources. 64. The economizing problem is one of deciding how to make the best use of: A. virtually unlimited resources to satisfy virtually unlimited wants. B. limited resources to satisfy virtually unlimited wants. C. unlimited resources to satisfy limited wants. D. limited resources to satisfy limited wants. 65. When the economist says that economic wants are insatiable, this means that: A. economic resources are valuable only because they can be used to produce consumer goods. B. economic resources – land, labor, capital, and entrepreneurial ability – are scarce. C. these wants are virtually unlimited and therefore incapable of complete satisfaction. D. the structure of consumer demand varies from time to time and from country to country. 66. The scarcity problem: A. persists only because countries have failed to achieve continuous full employment. B. persists because economic wants exceed available productive resources. C. has been solved in all industrialized nations. D. has been eliminated in affluent societies such as the United States and Canada. 67. The alternative combinations of two goods which a consumer can purchase with a given money income is shown by: A. a production possibilities curve. B. a demand curve. C. consumer expenditure line. D. a budget line.

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    68. The budget line shows: A. the amount of product A that a consumer is willing to give up to obtain one more unit of product B. B. all possible combinations of two goods that can be purchased, given money income and the prices of the goods. C. the minimum amount of two goods that a consumer can purchase with a given money income. D. all possible combinations of two goods that yield the same level of utility to the consumer. 69. Refer to the budget line shown in the diagram above. If the consumer's money income is $20, the: A. prices of C and D cannot be determined. B. price of C is $2 and the price of D is $4. C. consumer can obtain a combination of 5 units of both C and D . D. price of C is $4 and the price of D is $2. 70. Refer to the budget line shown in the diagram above. If the consumer's money income is $20, which of the following combinations of goods is unattainable ? A. 4 units of C, and 6 units of D. B. 5 units of C, and no units of D. C. 1 unit of C, and 8 units of D. D. 2 units of C, and 6 units of D. 71. Refer to the budget line shown in the diagram above. The absolute value of the slope of the budget line is: A. MU C /MU D . B. one - half. C. P D / P C . D. P C / P D .

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    72. In moving along a given budget line: A. the prices of both products and money income are assumed to be constant. B. each point on the line will be equally satisfactory to consumers. C. money income varies, but the prices of the two goods are constant. D. the prices of both products are assumed to vary, but money income is constant. 73. An increase in money income: A. shifts the consumer's budget line to the right. B. shifts the consumer's budget line to the left. C. increases the slope of the budget line. D. has no effect on the budget line. 74. In drawing a budget line it is assumed that: A. consumer preferences are fixed. B. the prices of the two products are variable. C. money income is fixed. D. consumer willingness to substitute between the two products is fixed. 75. The shift of the budget line from cd to ab in the above figure is consistent with: A. decreases in the prices of both M and N . B. an increase in the price of M and a decrease in the price of N . C. a decrease in money income. D. an increase in money income.

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